The idea of an individual worker credit has been floating around the tax ether for years but never seemed to get traction. That is until last December, when Congress passed its massive extension of the Bush tax cuts. One of the few new provisions in that law--the temporary payroll tax holiday--is, in fact, an individual worker credit. And it has, potentially at least, some important long-term consequences.

It would provide an individual subsidy to each worker in a couple, as opposed to the Earned Income Tax Credit (EITC) – a prominent support for low-income families – which provides a single subsidy based on joint earnings of married couples. A worker credit could provide substantial assistance to childless individuals who often do not qualify for the EITC, encourage work by secondary earners, and improve equity across all workers. Such a credit could also eliminate the onerous marriage penalties faced by low-income single parents whose EITCs can shrink or even disappear when they tie the knot.

Barack Obama proposed an individual worker credit in his presidential campaign. That effort culminated in the Making Work Pay (MWP) credit which provided up to $400 ($800 for married couples) in 2009 and 2010. Married couples could qualify for the entire $800 MWP, even if only one partner in the couple had earnings. In Obama’s original version, every worker would have qualified for his or her own credit, and couples would receive only twice the credit of singles if both partners in the couple had earnings.

However, an individual worker credit would be a large departure from the current income tax, which taxes couples rather than individuals. The law does include a few exceptions, such as the Child and Dependent Care Tax Credit where expenses claimed cannot exceed the lower-earning parent’s earnings. But typically, it’s the amount of total earnings that counts, not the source.

While an individual worker credit would be unusual for the income tax, it is a much simpler transition for the payroll tax, which has always been based on each worker’s income. And that’s how we’ll all get the one-year payroll tax cut included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This year the worker’s share of FICA payroll taxes drops from 6.2 percent to 4.2 percent of the first $106,800 of each worker’s earnings. By implementing a payroll tax cut, Congress seems to have come up with a convenient way to deliver an individual worker credit.

Convenient is not always best. And in this case, delivering an individual worker credit through the payroll tax system muddies the waters between personal income taxes and taxes paid to support Social Security. It would be cleaner to figure out a way to deliver the credit through the income tax system if this becomes a permanent feature of our tax system, rather than a one year tax cut.